SOLUTION: A DVD player can be purchased for $1500 down and $500 a month for 18 months. What is the equivalent price if the DVD player is purchased for cash? Assume that the interest rate on

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Question 1032183: A DVD player can be purchased for $1500 down and $500 a month for 18 months. What is the equivalent price if the DVD player is purchased for cash? Assume that the interest rate on credit is 15% compounded monthly.
Answer by robertb(5830) About Me  (Show Source):
You can put this solution on YOUR website!
Equivalent price = down payment + present value of all monthly payments.
Now present value of all monthly payments = P+=+R%28%281-%281%2Br%2Fn%29%5E%28-nt%29%29++++%2F%28r%2Fn%29%29.
Here, n = 12, t = 1.5, r = 0.15, R = 500.
==> P+=+500%28%281-%281%2B0.15%2F12%29%5E%28-18%29%29+%2F%280.15%2F12%29%29+=+8014.77.
==> Equivalent price = 1500 + 8014.77 = $9,514.77.